private sectors for building infrastructure
or providing public utilities. Through
this legal instrument, the Colombian
Government expects to sustain the
growth rate of the Colombian economy
and promote and enhance private
sector participation, trying to overcome
infrastructure and public utilities
deficiencies and gaps with respect to other
emerging economies.
Undertaking a PPP Project
analyzed and considered before any PPP
is undertaken:
be justified and all real options must be
evaluated.
the parties involved in the PPP and its
future contractors are essential for the
project's success.
In order to achieve suitable and ideal
value for money and innovation, it is
necessary to ease the procurement
requirements and permits to carry on
the project activities.
attraction: The project must be
lucrative in order to facilitate the
private sector participation which will
allow the PPPs to have better financial
conditions.
department or municipality involved in
the project must be committed to carry
out the aforementioned tasks during the
entire process, working in harmony and
joining efforts with the private sector in
order to achieve the PPP's objectives.
Trust as an Ideal Solution
projects in Colombia are commercial risk
and uncertainty.
to undertake large investments without
significant debt financing from financial
institutions (usually 30 percent equity and
70 percent debt). Lenders generally have
specific concerns, as they lend money
against known commercial risks and
usually are afraid of assuming legal and
political risks associated with the project.
For the purpose of addressing these
issues, trusts can be implemented as
tools not only for the administration of the
public sector resources, but also to control
the way they are invested.
To control uncertainty, the PPPīs trust
can include the following provisions and
regulations:
framework for lenders regarding the use
of resources by the person or people in
charge of the project.
payment and other kind of guarantees.
Stipulate that it will be the trust, not the
will be in charge of the development
of the project, or the one who is going
to own the goods required for its
development.
fulfil the obligations linked to it will be
owned by the trust.
an internal organization in which banks
and institutional lenders could have
a seat. From there, they will be able
to monitor the project and the way the
resources are being invested.
liquidation of the trust: It allows the
regulation of a complete framework to
protect the investor's interests through
the allocation of the trust assets in case
of liquidation.
examples of such trusts. On one hand,
some urban projects were implemented
of nearly 35,000 housing solutions where
trusts were used to administrate the
resources and to regulate the participation
of the public sector. Additionally,
during the last two years, the current
government used trusts as a mechanism to
administrate almost 2 billion dollars with
the objective of building another 100,000
housing solutions; currently at least
30,000 of these housing solutions have
been delivered to their final beneficiaries.
It can be concluded that to the extent
a legal regime provides a cohesive
and clear structure for the grant of
concessions, lenders will be encouraged to
provide financial support to PPP projects.
The legal regime should recognize the
lender's interest in establishing effective
security over the project and in ensuring
effective enforcement remedies. Trusts
could play an essential role considering
that within its internal regulation,
investors, project managers and the
public sector are able to create the
necessary environment to enhance their
participation, secure their rights and
develop the projects effectively.
lender's perspective and perceptions from
transition countries. Labadi W., Gramshi
A., Ramasastry A., http://www.ebrd.com/
downloads/legal/concessions/labadi.pdf.
(Accessed on 30-05-14).
EBRD core principles for a modern
concessions law selection and
justification of principles prepared by the
EBRD legal transition team. http://www.
ebrd.com/downloads/legal/concessions/
coreprin.pdf. (Accessed on 30-05-14).
on 30-05-14).